Consumer Behavior and Marketing Strategy
The study of consumers helps firms and organizations improve their marketing strategies by understanding issues such as how
- The psychology of how consumers think, feel, reason, and select between different alternatives (e.g., brands, products);
- The the psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, media);
- The behavior of consumers while shopping or making other marketing decisions;
- Limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome;
- How consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer; and
- How marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer.
Understanding these issues helps us adapt our strategies by taking the consumer into consideration. For example, by understanding that a number of different messages compete for our potential customers' attention, we learn that to be effective, advertisements must usually be repeated extensively. We also learn that consumers will sometimes be persuaded more by logical arguments, but at other times will be persuaded more by emotional or symbolic appeals. By understanding the consumer, we will be able to make a more informed decision as to which strategy to employ.
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One "official" definition of consumer behavior is "The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society." Although it is not necessary to memorize this definition, it brings up some useful points:
- Behavior occurs either for the individual, or in the context of a group (e.g., friends influence what kinds of clothes a person wears) or an organization (people on the job make decisions as to which products the firm should use).
- Consumer behavior involves the use and disposal of products as well as the study of how they are purchased. Product use is often of great interest to the marketer, because this may influence how a product is best positioned or how we can encourage increased consumption. Since many environmental problems result from product disposal (e.g., motor oil being sent into sewage systems to save the recycling fee, or garbage piling up at landfills) this is also an area of interest.
- Consumer behavior involves services and ideas as well as tangible products.
- The impact of consumer behavior on society is also of relevance. For example, aggressive marketing of high fat foods, or aggressive marketing of easy credit, may have serious repercussions for the national health and economy.
There are four main applications of consumer behavior:
- The most obvious is for marketing strategy-i.e., for making better marketing campaigns. For example, by understanding that consumers are more receptive to food advertising when they are hungry, we learn to schedule snack advertisements late in the afternoon. By understanding that new products are usually initially adopted by a few consumers and only spread later, and then only gradually, to the rest of the population, we learn that (1) companies that introduce new products must be well financed so that they can stay afloat until their products become a commercial success and (2) it is important to please initial customers, since they will in turn influence many subsequent customers' brand choices.
- A second application is public policy. In the 1980s, Accutane, a near miracle cure for acne, was introduced. Unfortunately, Accutane resulted in severe birth defects if taken by pregnant women. Although physicians were instructed to warn their female patients of this, a number still became pregnant while taking the drug. To get consumers' attention, the Federal Drug Administration (FDA) took the step of requiring that very graphic pictures of deformed babies be shown on the medicine containers.
- Social marketing involves getting ideas across to consumers rather than selling something. Marty Fishbein, a marketing professor, went on sabbatical to work for the Centers for Disease Control trying to reduce the incidence of transmission of diseases through illegal drug use. The best solution, obviously, would be if we could get illegal drug users to stop. This, however, was deemed to be infeasible. It was also determined that the practice of sharing needles was too ingrained in the drug culture to be stopped. As a result, using knowledge of consumer attitudes, Dr. Fishbein created a campaign that encouraged the cleaning of needles in bleach before sharing them, a goal that was believed to be more realistic.
- As a final benefit, studying consumer behavior should make us better consumers. Common sense suggests, for example, that if you buy a 64 liquid ounce bottle of laundry detergent, you should pay less per ounce than if you bought two 32 ounce bottles. In practice, however, you often pay a size premium by buying the larger quantity. In other words, in this case, knowing this fact will sensitize you to the need to check the unit cost labels to determine if you are really getting a bargain.
There are several units in the market that can be analyzed. Our main thrust in this course is the consumer. However, we will also need to analyze our own firm's strengths and weaknesses and those of competing firms. Suppose, for example, that we make a product aimed at older consumers, a growing segment. A competing firm that targets babies, a shrinking market, is likely to consider repositioning toward our market. To assess a competing firm's potential threat, we need to examine its assets (e.g., technology, patents, market knowledge, awareness of its brands) against pressures it faces from the market. Finally, we need to assess conditions (the marketing environment). For example, although we may have developed a product that offers great appeal for consumers, a recession may cut demand dramatically.
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There are two main categories of research methods. Secondary research uses research that has already been done by someone else. For example, marketers often find information compiled by the U.S. Census very useful. However, in some cases, information specific enough to satisfy a firm's needs is not publicly available. For example, a firm will have to run its own research to find out whether consumers would prefer that more vanilla taste be added to its soft drink brand. Original research that a firm does for itself is known as primary research.
There is no one perfect primary research method. Each has strengths and weaknesses, and thus the appropriate method must be selected based on research needs.
Surveys are useful for getting a great deal of specific information. Surveys can contain open-ended questions (e.g., "In which city and state were you born? ____________") or closed-ended, where the respondent is asked to select answers from a brief list (e.g., "__Male ___ Female." Open ended questions have the advantage that the respondent is not limited to the options listed, and that the respondent is not being influenced by seeing a list of responses. However, open-ended questions are often skipped by respondents, and coding them can be quite a challenge. In general, for surveys to yield meaningful responses, sample sizes of over 100 are usually required because precision is essential. For example, if a market share of twenty percent would result in a loss while thirty percent would be profitable, a confidence interval of 20-35% is too wide to be useful.
Surveys come in several different forms. Mail surveys are relatively inexpensive, but response rates are typically quite low-typically from 5-20%. Phone-surveys get somewhat higher response rates, but not many questions can be asked because many answer options have to be repeated and few people are willing to stay on the phone for more than five minutes. Mall intercepts are a convenient way to reach consumers, but respondents may be reluctant to discuss anything sensitive face-to-face with an interviewer.
Surveys, as any kind of research, is vulnerable to bias. The wording of a question can influence the outcome a great deal. For example, more people answered no to the question "Should speeches against democracy be allowed?" than answered yes to "Should speeches against democracy be forbidden?" For face-to-face interviews, interviewer bias is a danger, too. Interviewer bias occurs when the interviewer influences the way the respondent answers. For example, unconsciously an interviewer that works for the firm manufacturing the product in question may smile a little when something good is being said about the product and frown a little when something negative is being said. The respondent may catch on and say something more positive than his or her real opinion. Finally, a response bias may occur-if only part of the sample responds to a survey, the respondents' answers may not be representative of the population.
The case of "The Pentagon Declares War on Rush Limbaugh" illustrated that biased surveys are often taken at face value. It was reported in the national media, without question of the validity of the research, that only 3.8% of listeners to the Armed Forces Network wanted to listen to Rush Limbaugh. It turned out, however, that this inference was based on the question "What single thing can we do to improve programming?" Only if a respondent wrote in an answer mentioning Rush Limbaugh were he or she counted as wanting to listen to Rush.
Experiments are used when the researcher wants to rule out all but one explanation for a particular observation. Suppose, for example, that we observe that sales of our brand increase when we send out coupons. However, retailers may also give us better shelf space when the coupon is out; thus, we can't tell if it was the coupon or the shelf-placement that caused sales to increase-the two variables are confounded. In an experiment, we carefully control what varies. In this case, we invite in one hundred people and ask them to shop in a simulated store. Half of the respondents are randomly selected and get a coupon; the others do not. Since the only difference here was whether the subjects got a coupon or not, we can be more confident that differences in brand choice were due to the coupon. Experiments do, however, have a serious drawback in that the consumer is removed from his or her natural surroundings. For example, if we pay some consumers to come into a lab and watch TV "as you normally would," these consumers, figuring that they are being paid, may give more attention to the advertisements than they would at home.
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Focus groups involve getting a group of 6-12 consumers together to discuss product usage. Focus groups are especially useful if we do not have specific questions to ask yet, since we don't know what consumers' concerns might be. We start out talking broadly about the need that a product might serve, and only gradually move toward the product itself. For example, a firm considering the marketing of sugarfree cookies might start out its group talking about snacks-why people consume them and the benefits they expect. Gradually, we then move toward concerns people have about snacks. Eventually, we address sugar content and concerns that consumers have about that. Only toward the end of the session do we show consumers the actual product we are considering and ask for feedback. We postpone our consideration of the actual product toward the end because we want to be sure that we find out about the consumer's needs and desires rather than what he or she thinks about the specific product we have on the drawing board right now (that product can be changed, and it can be repositioned). Drawbacks of focus groups include high costs and the fact that generalization toward the entire population is difficult for such small sample sizes. The fact that focus groups involve social interaction also means that participants may say what they think will make themselves look good rather than what they really believe (the social desirability bias).
Personal interviews involve in-depth questioning of an individual about his or her interest in or experiences with a product. The benefit here is that we can get really into depth (when the respondent says something interesting, we can ask him or her to elaborate), but this method of research is costly and can be extremely vulnerable to interviewer bias.
Projective techniques are used when a consumer may feel embarrassed to admit to certain opinions, feelings, or preferences. For example, many older executives may not be comfortable admitting to being intimidated by computers. It has been found that in such cases, people will tend to respond more openly about "someone else." Thus, we may ask them to explain reasons why a friend has not yet bought a computer, or to tell a story about a person in a picture who is or is not using a product. The main problem with this method is that it is difficult to analyze responses.
Observation of consumers is often a powerful tool. Looking at how consumers select products may yield insights into how they make decisions and what they look for. For example, some American manufacturers were concerned about low sales of their products in Japan. Observing Japanese consumers, it was found that many of these Japanese consumers scrutinized packages looking for a name of a major manufacturer-the product specific-brands that are common in the U.S. (e.g., Tide) were not impressive to the Japanese, who wanted a name of a major firm like Mitsubishi or Proctor & Gamble. Observation may help us determine how much time consumers spend comparing prices, or whether nutritional labels are being consulted.
Physiological measures are occasionally used to examine consumer response. For example, advertisers may want to measure a consumer's level of arousal during various parts of an advertisement.
Although the text makes references to segmentation, this issue is not discussed explicitly in much detail. However, segmentation is important in consumer analysis because understanding the consumer will allow us segment the market more meaningfully.
Segmentation basically involves dividing consumers into groups such that members of a group (1) are as similar as possible to members of that same group but (2) differ as much as possible from members other segments. This enables us then to "treat" each segment differently-e.g., by:
- Providing different products (e.g., some consumers like cola taste, while others prefer lime)
- Offering different prices (some consumers will take the cheapest product available, while others will pay for desired features)
- Distributing the products where they are likely to be bought by the targeted segment.
- Each segment must have an identity-i.e., it must contain members that can be described in some way (e.g., price sensitive) that behave differently from another segment.
- Each segment must engage in systematic behaviors (e.g., a price sensitive segment should consistently prefer the low price item rather than randomly switching between high and low priced brands).
- Each segment must offer marketing mix efficiency potential-i.e., it must be profitable to serve. For example, a large segment may be profitable even though the competition it attracts tends to keep prices down. A smaller segment may be profitable if, for example, it is price insensitive or can be targeted efficiently (e.g., if its members consistently subscribe to one magazine where all the company's advertising can be put). Some segments are not cost effective. For example, a small group of consumers would love to have a no-sports news channel (similar to CNN), but we are just too small a group to profitable.
There are three "levels" of segmentation. Levels here refer to the tradeoff between the difficulty of implementing a segmentation scheme and the benefits that result.
The first level of segmentation involves personal characteristics-e.g., demographics. This is a fairly easy method of segmentation to employ because (1) we have a good idea of who is in each segment and (2) we can easily target these segments. For example, if we want to reach males ages fifteen through thirty-five, we can find out which TV shows they watch from firms such as Nielsen (similar services exist for newspapers and magazines). The trouble with this method of segmentation, however, is that there is often not a good correlation between personal characteristics of consumers and what they want to buy. Perhaps males may want more flavor, and be willing to settle for more calories, in a soft drink than women do, but there is a great deal of within group variation. Interestingly, it has been found that people who live in the same area, as operationalized by their zip-codes, tend to share a many consumption relevant characteristics. Firms such as Claritas will sell profiles of zip-code based communities that can be used in aiming messages at particularly receptive residents. For example, the U.S. Army aggressively targets communities dubbed "Guns and Pickups."
Psychographics includes a bit more information about the consumer than his or her mere descriptive characteristics. For example, two men could both be plumbers, aged 45, married with two children, and have annual incomes of $45,000. However, one could be couch potato who comes home and eats fast food while watching television. The other could be a health enthusiast who spends his time exercising. Several firms have tried to come up with psychographic profiles of consumers. One is the VALS project from the Stanford Research Institute (SRI). Since most of these programs are proprietary, there is not a lot of published research on their usefulness. However, some firms are paying a great deal of money for these firms' consulting. For example, Merrill Lynch used VALS to change its advertising strategy. The firm had seen a disappointing response to its advertising campaign featuring a herd bulls used to symbolize the bull market. A lot of consumers responded, but not the wealthier ones the firm had hoped for. By making a very simple change-substituting a lone bull for the herd-based on advice from SRI, the wealthier group, which wanted to "stand apart" from the crowd, was attracted.
The second level is benefit desired-that is, segmenting on what someone wants rather than who he or she is. Implementing segmentation on benefit desired is more difficult since we have to research for each product category. The benefit, however, is that we can now make product that matches more closely a particular segment's specific desires, and we can promote, price, and distribute it according to the desires of the segment. This method, then, lends itself extremely well to strong product positioning-we make a product that offers specific benefits, and we aggressively promote this fact to interested consumers. A drawback, however, is some efficiency is lost in marketing communication. While we can look up which television programs males ages twenty to thirty watch, we do not have this information for the segment of consumers that prefers scented over unscented handsoap.
The third level is segmentation based on behavior. Behavior here refers to a person's response (or lack of response) to a given treatment. For example, some consumers will switch from their preferred brand to another one that happens to be on sale (the "switchers,") while others will stay with the preferred brand (the "loyals.") The trick, then, is to get as many switchers as possible to switch to your brand (which will take some incentive, such as a cents off coupon) while not giving this incentive to the brand loyals (who would have bought your brand even without the discount). In practice, segmenting on behavior can be very difficult. For example, supermarkets spend a great deal of money to establish the "clubs" that give price sensitive customers who are willing to go through with the required paperwork discounts not available to the "lazier" ones that end up paying full price. Despite this difficulty, the rewards are often great, because we can tailor the kind of deal we give a consumer to the minimum concession needed to get that consumer to buy our (as opposed to a competing) product.
Direct marketing offers exceptional opportunities for segmentation because marketers can buy lists of consumer names, addresses, and phone-numbers that indicate their specific interests. For example, if we want to target auto enthusiasts, we can buy lists of subscribers to auto magazines and people who have bought auto supplies through the mail. We can also buy lists of people who have particular auto makes registered.
No one list will contain all the consumers we want, and in recent years technology has made it possible, through the "merge-purge" process, to combine lists. For example, to reach the above-mentioned auto-enthusiasts, we buy lists of subscribers to several different car magazines, lists of buyers from the Hot Wheels and Wiring catalog, and registrations of Porsche automobiles in several states. We then combine these lists (the merge part). However, there will obviously be some overlap between the different lists-some people subscribe to more than one magazine, for example. The purge process, in turn, identifies and takes out as many duplicates as possible. This is not as simple task as it may sound up front. For example, the address "123 Main Street, Apartment 45" can be written several ways-e.g., 123 Main St., #123, or 123-45 Main Str. Similarly, John J. Jones could also be written as J. J. Jones, or it could be misspelled Jon J. Jonnes. Software thus "standardizes" addresses (e.g., all street addresses would be converted into the format "123 Main St #45" and even uses phonetic analysis to identify a likely alternative spelling of the same name.
Response rates for "good" lists-lists that represent a logical reason why consumer would be interested in a product-are typically quite low, hovering around 2-3%. Simply picking a consumer out of the phone-book would yield even lower responses-much less than one percent. Keep in mind that a relevant comparison here is to conventional advertising. The response rate to an ad placed in the newspaper or on television is usually well below one percent (frequently more like one-tenth of one percent). (More than one percent of people who see an ad for Coca Cola on TV will buy the product, but most of these people would have bought Coke anyway, so the marginal response is low).
Culture is part of the external influences that impact the consumer. That is, culture represents influences that are imposed on the consumer by other individuals.
The definition of culture offered in the text is "That complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man person as a member of society." From this definition, we make the following observations:
- Culture, as a "complex whole," is a system of interdependent components.
- Knowledge and beliefs are important parts. In the U.S., we know and believe that a person who is skilled and works hard will get ahead. In other countries, it may be believed that differences in outcome result more from luck. "Chunking," the name for China in Chinese, literally means "The Middle Kingdom." The belief among ancient Chinese that they were in the center of the universe greatly influenced their thinking.
- Other issues are relevant. Art, for example, may be reflected in the rather arbitrary practice of wearing ties in some countries and wearing turbans in others. Morality may be exhibited in the view in the United States that one should not be naked in public. In Japan, on the other hand, groups of men and women may take steam baths together without perceived as improper. On the other extreme, women in some Arab countries are not even allowed to reveal their faces. Notice, by the way, that what at least some countries view as moral may in fact be highly immoral by the standards of another country. For example, the law that once banned interracial marriages in South Africa was named the "Immorality Act," even though in most civilized countries this law, and any degree of explicit racial prejudice, would itself be considered highly immoral.
Culture has several important characteristics: (1) Culture is comprehensive. This means that all parts must fit together in some logical fashion. For example, bowing and a strong desire to avoid the loss of face are unified in their manifestation of the importance of respect. (2) Culture is learned rather than being something we are born with. We will consider the mechanics of learning later in the course. (3) Culture is manifested within boundaries of acceptable behavior. For example, in American society, one cannot show up to class naked, but wearing anything from a suit and tie to shorts and a T-shirt would usually be acceptable. Failure to behave within the prescribed norms may lead to sanctions, ranging from being hauled off by the police for indecent exposure to being laughed at by others for wearing a suit at the beach. (4) Conscious awareness of cultural standards is limited. One American spy was intercepted by the Germans during World War II simply because of the way he held his knife and fork while eating. (5) Cultures fall somewhere on a continuum between static and dynamic depending on how quickly they accept change. For example, American culture has changed a great deal since the 1950s, while the culture of Saudi Arabia has changed much less.
It should be noted that there is a tendency of outsiders to a culture to overstate the similarity of members of that culture to each other. In the United States, we are well aware that there is a great deal of heterogeneity within our culture; however, we often underestimate the diversity within other cultures. For example, in Latin America, there are great differences between people who live in coastal and mountainous areas; there are also great differences between social classes.
Cultural rules can be categorized into three types. Formal rules carry relatively explicit standards as to how one should behave, and violations often carry severe sanctions. For example, in many countries, two forms of the second pronoun (you) exist, with different levels of deference associated with each (e.g., tú and usted in Spanish and tu and vous in Spanish-German even has three levels!) In Japan, senior executives will enter and leave a meeting room before subordinates in a very deliberate manner. Informal rules, on the other hand, are less explicit and may not carry sanctions for violation. For example, in the U.S., most people would consider eating dinner at 10:00 p.m. weird, while this is perfectly normal in parts of Latin American and Southern Europe. Finally, technical cultural rules involve implicit standards as to what constitutes a good product. For example, in India, a movie must have at least seven songs to be successful; in the U.S., preempting the soundtrack for that amount of time would not be desirable.
Language is an important element of culture. It should be realized that regional differences may be subtle. For example, one word may mean one thing in one Latin American country, but something off-color in another. It should also be kept in mind that much information is carried in non-verbal communication. In some cultures, we nod to signify "yes" and shake our heads to signify "no;" in other cultures, the practice is reversed.
Different perspectives exist in different cultures on several issues; e.g.:
- Monochronic cultures tend to value precise scheduling and doing one thing at a time; in polychronic cultures, in contrast, promptness is valued less, and multiple tasks may be performed simultaneously. (See text for more detail).
- Space is perceived differently. Americans will feel crowded where people from more densely populated countries will be comfortable.
- Symbols differ in meaning. For example, while white symbols purity in the U.S., it is a symbol of death in China. Colors that are considered masculine and feminine also differ by culture.
- Americans have a lot of quite shallow friends toward whom little obligation is felt; people in European and some Asian cultures have fewer, but more significant friends. For example, one Ph.D. student from India, with limited income, felt obligated to try buy an airline ticket for a friend to go back to India when a relative had died.
- In the U.S. and much of Europe, agreements are typically rather precise and contractual in nature; in Asia, there is a greater tendency to settle issues as they come up. As a result, building a relationship of trust is more important in Asia, since you must be able to count on your partner being reasonable.
- In terms of etiquette, some cultures have more rigid procedures than others. In some countries, for example, there are explicit standards as to how a gift should be presented. In some cultures, gifts should be presented in private to avoid embarrassing the recipient; in others, the gift should be made publicly to ensure that no perception of secret bribery could be made.
The United States has undergone some changes in its predominant culture over the last several decades. Again, however, it should be kept in mind that there are great variations within the culture. For example, on the average, Americans have become less materialistic and have sought more leisure; on the other hand, the percentage of people working extremely long hours has also increased. The text discusses changes in values in more detail.
Significant changes have occurred in gender roles in American society. One of the reasons for this is that more women work outside the home than before. However, women still perform a disproportionate amount of housework, and men who participate in this activity tend to do so reluctantly. In general, commercials tend to lag somewhat behind reality-e.g., few men are seen doing housework, and few women are seen as buyers and decision makers on automobile purchases.
Subculture refers to a culture within a culture. For example, African Americans are, as indicated in the group name, Americans; however, a special influence of the African American community is often also present. For example, although this does not apply to everyone, African Americans tend to worship in churches that have predominantly African American membership, and church is often a significant part of family life.
Different perspectives on the diversity in U.S. culture exist. The "melting pot" metaphor suggests that immigrants gradually assimilate after they arrive. Therefore, in the long run, there will be few differences between ethnic groups and instead, one mainstream culture that incorporates elements from each will result. The "salad bowl" metaphor, in contrast, suggests that although ethnic groups will interact as a whole (through the whole mix of salad) and contain some elements of the whole (through the dressing), each group will maintain its own significant traits (each vegetable is different from the others). The "melting pot" view suggests that one should run integrated promotions aimed at all groups; the "salad bowl" approach suggests that each group should be approached separately.
Subculture is often categorized on the basis of demographics. Thus, for example, we have the "teenage" subculture and the "Cuban-American" subculture. While part of the overall culture, these groups often have distinguishing characteristics. An important consequence is that a person who is part of two subcultures may experience some conflict. For example, teenage native Americans experience a conflict between the mainstream teenage culture and traditional Indian ways.
Values are often greatly associated with age groups because people within an age-group have shared experiences. For example, it is believed that people old enough to have experienced the American Depression are more frugal because of that experience.
Regional influence, both in the United States and other areas, is significant. Many food manufacturers offer different product variations for different regions. Joel Garreau, in his book The Nine Nations of North America, proposed nine distinct regional subcultures that cut across state lines. Although significant regional differences undoubtedly exist, research has failed to support Garreau's specific characterizations
Demographics and Social Stratification
Demographics are clearly tied to subculture and segmentation. Here, however, we shift our focus from analyzing specific subcultures to trying to understand the implications for an entire population of its makeup.
Several issues are useful in the structure of a population. For example, in some rapidly growing countries, a large percentage of the population is concentrated among younger generations. In countries such as Korea, China, and Taiwan, this has helped stimulate economic growth, while in certain poorer countries, it puts pressures on society to accommodate an increasing number of people on a fixed amount of land. Other countries such as Japan and Germany, in contrast, experience problems with a "graying" society, where fewer non-retired people are around to support an increasing number of aging seniors. Because Germany actually hovers around negative population growth, the German government has issued large financial incentives, in the forms of subsidies, for women who have children. In the United States, population growth occurs both through births and immigration. Since the number of births is not growing, problems occur for firms that are dependent on population growth (e.g., Gerber, a manufacturer of baby food).
Social class is a somewhat nebulous subject that involves stratifying people into groups with various amounts of prestige, power, and privilege. In part because of the pioneering influence in American history, status differentiations here are quite vague. We cannot, for example, associate social class with income, because a traditionally low status job as a plumber may today come with as much income as a traditionally more prestigious job as a school teacher. In certain other cultures, however, stratification is more clear-cut. Although the caste system in India is now illegal, it still maintains a tremendous influence on that society. While some mobility exists today, social class awareness is also somewhat greater in Britain, where social status is in part reinforced by the class connotations of the accent with which one speaks.
The text speaks of several indices that have been used to "compute" social class in the United States, weighing factors such as income, the nature of one's employment, and level of education. Taken too literally, these indices are not very meaningful; more broadly speaking, they illustrate the reality that social status is a complex variable that is determined, not always with consensus among observers, by several different variables.
Family Decision Making
The Family Life Cycle. Individuals and families tend to go through a "life cycle." The simple life cycle goes from
child/teenager ---> young single ---> young couple* ---> full nest
---> empty nest ---> widow(er).
*For purposes of this discussion, a "couple" may either be married or merely involve living together. The breakup of a non-marital relationship involving cohabitation is similarly considered equivalent to a divorce.
In real life, this situation is, of course, a bit more complicated. For example, many couples undergo divorce. Then we have the scenario:
full nest ---> single parent
This situation can result either from divorce or from the death of one parent. Divorce usually entails a significant change in the relative wealth of spouses. In some cases, the non-custodial parent (usually the father) will not pay the required child support, and even if he or she does, that still may not leave the custodial parent and children as well off as they were during the marriage. On the other hand, in some cases, some non-custodial parents will be called on to pay a large part of their income in child support. This is particularly a problem when the non-custodial parent remarries and has additional children in the second (or subsequent marriages). In any event, divorce often results in a large demand for:
- low cost furniture and household items
- time-saving goods and services
Divorced parents frequently remarry, or become involved in other non-marital relationships; thus, we may see
full nest ---> single parent ---> blended family
Another variation involves
young single ---> single parent
Here, the single parent who assumes responsibility for one or more children may not form a relationship with the other parent of the child.
Generally, there are two main themes in the Family Life Cycle, subject to significant exceptions:
- As a person gets older, he or she tends to advance in his or her career and tends to get greater income (exceptions: maternity leave, divorce, retirement).
- Unfortunately, obligations also tend to increase with time (at least until one's mortgage has been paid off). Children and paying for one's house are two of the greatest expenses.
Note that although a single person may have a lower income than a married couple, the single may be able to buy more discretionary items.
Family Decision Making: Individual members of families often serve different roles in decisions that ultimately draw on shared family resources. Some individuals are information gatherers/holders, who seek out information about products of relevance. These individuals often have a great deal of power because they may selectively pass on information that favors their chosen alternatives. Influencers do not ultimately have the power decide between alternatives, but they may make their wishes known by asking for specific products or causing embarrassing situations if their demands are not met. The decision maker(s) have the power to determine issues such as:
- whether to buy;
- which product to buy (pick-up or passenger car?);
- which brand to buy;
- where to buy it; and
- when to buy.
Note, however, that the role of the decision maker is separate from that of the purchaser. From the point of view of the marketer, this introduces some problems since the purchaser can be targeted by point-of-purchase (POP) marketing efforts that cannot be aimed at the decision maker. Also note that the distinction between the purchaser and decision maker may be somewhat blurred:
- the decision maker may specify what kind of product to buy, but not which brand;
- the purchaser may have to make a substitution if the desired brand is not in stock;
- the purchaser may disregard instructions (by error or deliberately).
It should be noted that family decisions are often subject to a great deal of conflict. The reality is that few families are wealthy enough to avoid a strong tension between demands on the family's resources. Conflicting pressures are especially likely in families with children and/or when only one spouse works outside the home. Note that many decisions inherently come down to values, and that there is frequently no "objective" way to arbitrate differences. One spouse may believe that it is important to save for the children's future; the other may value spending now (on private schools and computer equipment) to help prepare the children for the future. Who is right? There is no clear answer here. The situation becomes even more complex when more parties-such as children or other relatives-are involved.
Some family members may resort to various strategies to get their way. One is bargaining-one member will give up something in return for someone else. For example, the wife says that her husband can take an expensive course in gourmet cooking if she can buy a new pickup truck. Alternatively, a child may promise to walk it every day if he or she can have a hippopotamus. Another strategy is reasoning-trying to get the other person(s) to accept one's view through logical argumentation. Note that even when this is done with a sincere intent, its potential is limited by legitimate differences in values illustrated above. Also note that individuals may simply try to "wear down" the other party by endless talking in the guise of reasoning (this is a case of negative reinforcement as we will see subsequently). Various manipulative strategies may also be used. One is impression management, where one tries to make one's side look good (e.g., argue that a new TV will help the children see educational TV when it is really mostly wanted to see sports programming, or argue that all "decent families make a contribution to the church"). Authority involves asserting one's "right" to make a decision (as the "man of the house," the mother of the children, or the one who makes the most money). Emotion involves making an emotional display to get one's way (e.g., a man cries if his wife will not let him buy a new rap album).
Humans are inherently social animals, and individuals greatly influence each other.
A useful framework of analysis of group influence on the individual is the so called reference group-the term comes about because an individual uses a relevant group as a standard of reference against which oneself is compared. Reference groups come in several different forms. The aspirational reference group refers to those others against whom one would like to compare oneself. For example, many firms use athletes as spokespeople, and these represent what many people would ideally like to be. Associative reference groups include people who more realistically represent the individuals' current equals or near-equals-e.g., coworkers, neighbors, or members of churches, clubs, and organizations. Finally, the dissociative reference group includes people that the individual would not like to be like. For example, the store literally named The Gap came about because many younger people wanted to actively dissociate from parents and other older and "uncool" people. The Quality Paperback Book specifically suggests in its advertising that its members are "a breed apart" from conventional readers of popular books.
Reference groups come with various degrees of influence. Primary reference groups come with a great deal of influence-e.g., members of a fraternity/sorority. Secondary reference groups tend to have somewhat less influence-e.g., members of a boating club that one encounters only during week-ends are likely to have their influence limited to consumption during that time period.
Another typology divides reference groups into the informational kind (influence is based almost entirely on members' knowledge), normative (members influence what is perceived to be "right," "proper," "responsible," or "cool"), or identification. The difference between the latter two categories involves the individual's motivation for compliance. In case of the normative reference group, the individual tends to comply largely for utilitarian reasons-dressing according to company standards is likely to help your career, but there is no real motivation to dress that way outside the job. In contrast, people comply with identification groups' standards for the sake of belonging-for example, a member of a religious group may wear a symbol even outside the house of worship because the religion is a part of the person's identity.
Diffusion of Innovation
The diffusion of innovation refers to the tendency of new products, practices, or ideas to spread among people. Usually, when new products or ideas come about, they are only adopted by a small group of people initially; later, many innovations spread to other people. The bell shaped curve frequently illustrates the rate of adoption of a new product. Cumulative adoptions are reflected by the S-shaped curve. The saturation point is the maximum proportion of consumers likely to adopt a product. In the case of refrigerators in the U.S., the saturation level is nearly one hundred percent of households; it well below that for video games that, even when spread out to a large part of the population, will be of interest to far from everyone.
Several specific product categories have case histories that illustrate important issues in adoption. Until some time in the 1800s, few physicians bothered to scrub prior to surgery, even though new scientific theories predicted that small microbes not visible to the naked eye could cause infection. Younger and more progressive physicians began scrubbing early on, but they lacked the stature to make their older colleagues follow.
ATM cards spread relatively quickly. Since the cards were used in public, others who did not yet hold the cards could see how convenient they were. Although some people were concerned about security, the convenience factors seemed to be a decisive factor in the "tug-of-war" for and against adoption.
The case of credit cards was a bit more complicated and involved a "chicken-and-egg" paradox. Accepting credit cards was not a particularly attractive option for retailers until they were carried by a large enough number of consumers. Consumers, in contrast, were not particularly interested in cards that were not accepted by a large number of retailers. Thus, it was necessary to "jump start" the process, signing up large corporate accounts, under favorable terms, early in the cycle, after which the cards became worthwhile for retailers to accept.
Rap music initially spread quickly among urban youths in large part because of the low costs of recording. Later, rap music became popular among a very different segment, suburban youths, because of its apparently authentic depiction of an exotic urban lifestyle.
Hybrid corn was adopted only slowly among many farmers. Although hybrid corn provided yields of about 20% more than traditional corn, many farmers had difficulty believing that this smaller seed could provide a superior harvest. They were usually reluctant to try it because a failed harvest could have serious economic consequences, including a possible loss of the farm. Agricultural extension agents then sought out the most progressive farmers to try hybrid corn, also aiming for farmers who were most respected and most likely to be imitated by others. Few farmers switched to hybrid corn outright from year to year. Instead, many started out with a fraction of their land, and gradually switched to 100% hybrid corn when this innovation had proven itself useful.
Several forces often work against innovation. One is risk, which can be either social or financial. For example, early buyers of the CD player risked that few CDs would be recorded before the CD player went the way of the 8 track player. Another risk is being perceived by others as being weird for trying a "fringe" product or idea. For example, Barbara Mandrell sings the song "I Was Country When Country Wasn't Cool." Other sources of resistance include the initial effort needed to learn to use new products (e.g., it takes time to learn to meditate or to learn how to use a computer) and concerns about compatibility with the existing culture or technology. For example, birth control is incompatible with strong religious influences in countries heavily influenced by Islam or Catholicism, and a computer database is incompatible with a large, established card file.
Innovations come in different degrees. A continuous innovation includes slight improvements over time. Very little usually changes from year to year in automobiles, and even automobiles of the 1990s are driven much the same way that automobiles of the 1950 were driven. A dynamically continuous innovation involves some change in technology, although the product is used much the same way that its predecessors were used-e.g., jet vs. propeller aircraft. A discontinous innovation involves a product that fundamentally changes the way that things are done-e.g., the fax and photocopiers. In general, discontinuous innovations are more difficult to market since greater changes are required in the way things are done, but the rewards are also often significant.
Several factors influence the speed with which an innovation spreads. One issue is relative advantage (i.e., the ratio of risk or cost to benefits). Some products, such as cellular phones, fax machines, and ATM cards, have a strong relative advantage. Other products, such as automobile satellite navigation systems, entail some advantages, but the cost ratio is high. Lower priced products often spread more quickly, and the extent to which the product is trialable (farmers did not have to plant all their land with hybrid corn at once, while one usually has to buy a cellular phone to try it out) influence the speed of diffusion. Finally, the extent of switching difficulties influences speed-many offices were slow to adopt computers because users had to learn how to use them.
Some cultures tend to adopt new products more quickly than others, based on several factors:
- Modernity: The extent to which the culture is receptive to new things. In some countries, such as Britain and Saudi Arabia, tradition is greatly valued-thus, new products often don't fare too well. The United States, in contrast, tends to value progress.
- Homophily: The more similar to each other that members of a culture are, the more likely an innovation is to spread-people are more likely to imitate similar than different models. The two most rapidly adopting countries in the World are the U.S. and Japan. While the U.S. interestingly scores very low, Japan scores high.
- Physical distance: The greater the distance between people, the less likely innovation is to spread.
- Opinion leadership: The more opinion leaders are valued and respected, the more likely an innovation is to spread. The style of opinion leaders moderates this influence, however. In less innovative countries, opinion leaders tend to be more conservative, i.e., to reflect the local norms of resistance.
It should be noted that innovation is not always an unqualifiedly good thing. Some innovations, such as infant formula adopted in developing countries, may do more harm than good. Individuals may also become dependent on the innovations. For example, travel agents who get used to booking online may be unable to process manual reservations.
Sometimes innovations are disadopted. For example, many individuals disadopt cellular phones if they find out that they don't end up using them much.
Background. Our perception is an approximation of reality. Our brain attempts to make sense out of the stimuli to which we are exposed. This works well, for example, when we "see" a friend three hundred feet away at his or her correct height; however, our perception is sometimes "off"-for example, certain shapes of ice cream containers look like they contain more than rectangular ones with the same volume.
Factors in percpetion. Several sequential factors influence our perception. Exposure involves the extent to which we encounter a stimulus. For example, we are exposed to numerous commercial messages while driving on the freeway: bill boards, radio advertisements, bumper-stickers on cars, and signs and banners placed at shopping malls that we pass. Most of this exposure is random-we don't plan to seek it out. However, if we are shopping for a car, we may deliberately seek out advertisements and "tune in" when dealer advertisements come on the radio.
Exposure is not enough to significantly impact the individual-at least not based on a single trial (certain advertisements, or commercial exposures such as the "Swoosh" logo, are based on extensive repetition rather than much conscious attention). In order for stimuli to be consciously processed, attention is needed. Attention is actually a matter of degree-our attention may be quite high when we read directions for getting an income tax refund, but low when commercials come on during a television program. Note, however, that even when attention is low, it may be instantly escalated-for example, if an advertisement for a product in which we are interested comes on.
Interpretation involves making sense out of the stimulus. For example, when we see a red can, we may categorize it as a CokeÒ .
Weber's Law suggests that consumers' ability to detect changes in stimulus intensity appear to be strongly related to the intensity of that stimulus to begin with. That is, if you hold an object weighing one pound in your hand, you are likely to notice it when that weight is doubled to two pounds. However, if you are holding twenty pounds, you are unlikely to detect the addition of one pound-a change that you easily detected when the initial weight was one pound. You may be able to eliminate one ounce from a ten ounce container, but you cannot as easily get away with reducing a three ounce container to two (instead, you must accomplish that gradually-e.g., 3.0 --> 2.7 --> 2.5 --> 2.3 --> 2.15 -> 2.00).
Several factors influence the extent to which stimuli will be noticed. One obvious issue is relevance. Consumers, when they have a choice, are also more likely to attend to pleasant stimuli (but when the consumer can't escape, very unpleasant stimuli are also likely to get attention-thus, many very irritating advertisements are remarkably effective).
Surprising stimuli are likely to get more attention-survival instinct requires us to give more attention to something unknown that may require action. A greater contrast (difference between the stimulus and its surroundings) as well as greater prominence (e.g., greater size, center placement) also tend to increase likelihood of processing.
Learning and Memory
Background. Learning involves "a change in the content or organization of long term memory and/or behavior." The first part of the definition focuses on what we know (and can thus put to use) while the second focuses on concrete behavior. For example, many people will avoid foods that they consumed shortly before becoming ill. Learning is not all knowledge based. For example, we may experience the sales people in one store being nicer to us than those in the other. We thus may develop a preference for the one store over the other; however, if pressed, we may not be able to give a conscious explanation as to the reason for our preference.
Much early work on learning was actually done on rats and other animals (and much of this research was unjustifiably cruel, but that is another matter).
Classical conditioning. Pavlov's early work on dogs was known as classical conditioning. Pavlov discovered that when dogs were fed meat powder they salivated. Pavlov then discovered that if a bell were rung before the dogs were fed, the dogs would begin salivating in anticipation of being fed (this was efficient, since they could then begin digesting the meat powder immediately). Pavlov then found that after the meat had been "paired" with the meat powder enough times, Pavlov could ring the bell without feeding the dogs and they would still salivate.
In the jargon of classical conditioning, the meat powder was an unconditioned stimulus (US) and the salivation was, when preceded by the meat powder, an unconditioned response (UR). That is, it is a biologically "hard-wired" response to salivate when you are fed. By pairing the bell with the unconditioned stimulus, the bell became a conditioned stimulus (CS) and salivation in response to the bell (with no meat powder) became a conditioned response (CR).
Many modern day advertisers use classical conditioning in some way. Consider this sequence:
Beautiful woman (US) ---> emotional arousal (UR) in males
Beautiful woman (US) + automobile (not yet CS) ---> arousal (US) [repeated many times]
Automobile (CS) ---> arousal (CR)
(For the exam, you should be able to diagram an example given).
Operant conditioning. Instrumental, or operant, conditioning, involves a different series of events, and this what we usually think of as learning. The general pattern is:
Behavior ---> consequences ---> behavior is more or less likely to be repeated
There are three major forms of operant learning. In positive reinforcement, an individual does something and is rewarded. He or she is then more likely to repeat the behavior. For example, you eat a candy bar (behavior), it tastes good (consequence), and you are thus more likely to eat a similar candy bar in the future (behavioral change).
Punishment is the opposite. You eat what looks like a piece of candy (behavior), only to discover that it is a piece of soap with a foul taste (consequences), and subsequently you are less likely to eat anything that looks remotely like that thing ever again (changed behavior).
It should be noted that negative reinforcement is very different from punishment. An example of negative reinforcement is an obnoxious sales person who calls you up on the phone, pressuring you into buying something you don't want to do (aversive stimulus). You eventually agree to buy it (changed behavior), and the sales person leaves you alone (the aversive stimulus is terminated as a result of consequences of your behavior).
Please note the examples of reinforcement, punishment, and negative reinforcement on the notes handout.
In general, marketers usually have relatively little power to use punishment or negative reinforcement. However, parking meters are often used to discourage consumers from taking up valuable parking space, and manufacturers may void warranties if the consumers take their product to non-authorized repair facilities.
Several factors influence the effectiveness of operant learning. In general, the closer in time the consequences are to the behavior, the more effective the learning. That is, electric utilities would be more likely to influence consumers to use less electricity at peak hours if the consumers actually had to pay when they used electricity (e.g., through a coin-slot) rather than at the end of the month. Learning is also more likely to occur when the individual can understand a relationship between behavior and consequences (but learning may occur even if this relationship is not understood consciously).
Another issue is schedules of reinforcement and extinction. Extinction occurs when behavior stops having consequences and the behavior then eventually stops occurring. For example, if a passenger learns that yelling at check-in personnel no longer gets her upgraded to first class, she will probably stop that behavior. Sometimes, an individual is rewarded every time a behavior is performed (e.g., a consumer gets a soft drink every time coins are put into a vending machine). However, it is not necessary to reward a behavior every time for learning to occur. Even if a behavior is only rewarded some of the time, the behavior may be learned. Several different schedules of reinforcement are possible:
- Fixed interval: The consumer is given a free dessert on every Tuesday when he or she eats in a particular restaurant.
- Fixed ratio: Behavior is rewarded (or punished) on every nth occasion that it is performed. (E.g., every tenth time a frequent shopper card is presented, a free product is provided).
- Variable ratio: Every time an action is performed, there is a certain percentage chance that a reward will be given. For example, every time the consumer enters the store, he or she is given a lottery ticket. With each ticket, there is a 20% chance of getting a free hamburger. The consumer may get a free hamburger twice in a row, or he or she may go ten times without getting a hamburger even once.
Variable ratio reinforcement is least vulnerable to extinction.
Sometimes, shaping may be necessary to teach the consumer the desired behavior. That is, it may be impossible to teach the consumer to directly perform the desired behavior. For example, a consumer may first get a good product for free (the product itself, if good, is a reward), then buy it with a large cents off coupon, and finally buy it at full price. Thus, we reinforce approximations of the desired behavior. Rather than introducing Coca Cola directly in Indonesia, fruit flavored soft drinks were first introduced, since these were more similar to beverages already consumed.
Vicarious learning. The consumer does not always need to go through the learning process himself or herself-sometimes it is possible to learn from observing the consequences of others. For example, stores may make a big deal out of prosecuting shop lifters not so much because they want to stop that behavior in the those caught, but rather to deter the behavior in others. Similarly, viewers may empathize with characters in advertisements who experience (usually positive) results from using a product. The Head 'n' Shoulders advertisement, where a poor man is rejected by women until he treats his dandruff with an effective cure, is a good example of vicarious learning.
Memory. There are two kinds of memory. When you see an ad on TV for a mail order product you might like to buy, you only keep the phone number in memory until you have dialed it. This is known as short term memory. In order for something to enter into long term memory, which is more permanent, you must usually "rehearse" it several times. For example, when you move and get a new phone number, you will probably repeat it to yourself many times. Alternatively, you get to learn your driver's license or social security numbers with time, not because you deliberately memorize them, but instead because you encounter them numerous times as you look them up.
A special issue in memory are so called "scripts," or procedures we remember for doing things. Scripts involve a series of steps for doing various things (e.g., how to send a package). In general, it is useful for firms to have their brand names incorporated into scripts (e.g., to have the consumer reflexively ask the pharmacist for Bayer rather than an unspecified brand of aspirin).
Motivation, Personality, and Emotion
Perspectives on Consumer Behavior and Motivation. We considered several perspectives on behavior as a way to understand what motivates the consumer. Each of these perspectives suggests different things as to what the marketer should do and what can (and cannot) be controlled. Note that each perspective tends to contain a "grain" oftruth and that
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